In keeping with the castaway analogy of last week, this
week’s developments, particularly among Republicans in the US House regarding a
Fiscal Cliff deal reached by the end of the year is akin to a sail on the
horizon. This begs the question of how big a sail; skiff or schooner?
All sources indicate that Speaker Boehner (R-OH) wants
to negotiate a settlement by year end and floated the Rep. Cole (R-OK) trial
balloon to socialize within his caucus an income tax hike. Sen. Schumer (D-NY)
has pressed for a compromise at $1 million, but that’s too high for the White
House and would give Schumer too much credit. Meanwhile, Republicans in the
House are getting comfortable with a $500,000 threshold and that’s likely
where the tax negotiation will begin to gel at between current and Clinton
rates.
If the morose demeanor among some GOP Senate staffs when
discussing the Fiscal Cliff is any indication, the sense is House Republicans
cave on tax hikes before the White House does so on entitlements. A bipartisan
letter this week from 80 House Members urging a settlement that includes new
revenue, spending reductions and entitlement reform is significant only because
40 GOPers signed (two of the
letter’s instigators are not returning in 2013). It is safe to assume Boehner’s
socialization efforts are working. Boehner’s purge of Tea Party Republicans from key
committees was a clear sign that his caucus best get in line or lose
assignments and seniority – and that includes a Fiscal Cliff deal when it
comes. Boehner is setting a tone to avoid a 113th Congress being like
the 112th
when the tail (GOP freshman) wagged the dog (GOP leadership).
The White House is more likely to concede on raising
Medicare’s eligibility age than adjusting Social Security’s annual inflation:
assume Social Security is off the table and a non-starter just as Boehner’s
effort to link the Affordable Care Act to negotiations went nowhere. To get
these concessions House Republicans will also be pressed by the White House to
agree to a debt
ceiling increase,
further complicating an accord.
If Washington takes the country over the Fiscal Cliff,
the sectors hardest hit by sequestration ($1.2 trillion in spending cuts over
the next decade) are defense, higher education, healthcare and US municipalities.
The week ended with Speaker Boehner reporting there’d be
no progress until President Obama makes a counteroffer to Republican’s proffer
of Erskine Bowles’ spit-balled plan from 2011 testimony before the Joint Select
Committee on Deficit Reduction that succeeded the Simpson Bowles Committee
report. A public White House counteroffer is unlikely as the WH maintains and
continues to press the advantage.
Filibuster Reform: Senate Minority
Leader McConnell (R-KY) does not think Majority Leader Reid (R-NV) will reform
Senate rules – and he’s mistaken. Reid has been personally whipping his caucus
to eliminate the ability to filibuster certain procedures (motion to proceed is
the most likely to be reformed) with 51 votes (the constitutional option –
versus the nuclear option which applies if done mid-session, not at the opening
of the session). What this means is it will be more difficult for the Senate
GOP to derail Democratic job legislation (potentially stimulus funding but also
bills specific to the private sector). Look for attempts to reform Reverse
Morris Trusts
with the intent to tax those transactions and prevent a merger in the guise of
a tax free transfer. Also look for a Financial Speculation Tax (0.03% of all trades
on stocks, bonds, derivatives and others) per Sen. Harkin’s (D-IA) bill.
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